LiquiTrade, the company behind the Latoken crypto exchange, has been found guilty of illegally operating an exchange in Canada. A panel established by the British Columbia Securities Commission (BCSC) reached this verdict after a nearly two-year investigation. The accusations against LiquiTrade first arose in November 2022 when it was alleged that the company had violated Canada’s Securities Act by facilitating daily transactions worth $300 million for its 1.5 million users.
According to the BCSC panel, LiquiTrade had never been registered under the Act, and there was no recognized exchange or clearing agency in British Columbia operated by the company or under the name LATOKEN. The panel also discovered that LiquiTrade allowed users to trade contractual rights of underlying crypto assets, which were considered derivatives investments. As a result, LiquiTrade was required to be registered under the Securities Act before engaging in contract trading in Canada, specifically in British Columbia. The panel concluded that LiquiTrade had been operating as an unauthorized exchange, which is a clear violation of the Act.
LiquiTrade now joins the list of banned crypto platforms in Canada, including Catalyx, KuCoin, Poloniex, and xt.com exchange. On the other hand, there are 15 authorized crypto trading platforms in the region, such as Bitbuy, Coinbase, and Fidelity.
Sanctions against LiquiTrade are expected to be imposed by August 14, and they could range from monetary penalties to a complete ban on services. This comes as several crypto firms have already withdrawn from Canada due to increased regulatory scrutiny. Binance, the world’s largest crypto exchange, withdrew from Canada in October, citing new guidance on stablecoins and investor limits. OKX also revealed its departure from the Canadian market in March, blaming new regulations.
Canada has taken a strict stance against crypto companies, with the Canadian Securities Administrators introducing new rules in February 2023. These rules require crypto firms to commit to protecting investors through an enhanced pre-registration undertaking. This includes implementing segregation in crypto custody, having a chief compliance officer on staff, eliminating leveraged trading, and not allowing users to trade or hold stablecoins.
Despite these challenges, some exchanges remain committed to succeeding in the regulated Canadian market. Coinbase, for example, has appointed a former executive from Shopify as its new country director in Canada as part of its strategy to adapt to the evolving regulatory landscape. However, there has been a surge in crypto scams targeting Canadian citizens, prompting the Canadian Anti-Fraud Centre (CAFC) to issue a warning in collaboration with the Canadian Investment Regulatory Organization (CIRO) to raise awareness about these sophisticated scams.
